The 2012 State New Economy Index, penned by Robert D. Atkinson and Luke A. Stewart, showcases the regions that are at the forefront of the nation’s movement toward a global, innovation-based New Economy. The index, produced by the Information Technology and Innovation Foundation (ITIF), ranks states on a series of indicators that analyze the environment for innovation and high-tech job growth.

A Culture of Innovation

Massachusetts topped the index again in 2012 as it did in the 1999, 2002, 2007, 2008 and 2010 editions, in part due to the fact that 7.8 percent of the state's total jobs are in high-tech industries. A high concentration of software and hardware companies, a booming biotechnology industry and a number of top-notch research universities all add to the Bay State's strengths when it comes to meeting the needs of the New Economy.

The Commonwealth was also notable for having the 3rd highest percentage of jobs held by scientists and engineers (5.4%), the highest innovation capacity, the 2nd best broadband in the nation and the 5th most patents per 1,000 working-age residents.

Delaware, Washington, California and Maryland rounded out the top five in the 2012 index. Elsewhere in New England, Connecticut ranked 9th, New Hampshire was 12th, Vermont came in 15th, Rhode Island was 23rd, and Maine was the lowest ranked in the region at 27th.

“More than three years on from the end of the Great Recession, only six states have regained employment levels enjoyed prior to the recession and 17 states are still more than 5 percent below their pre-recession employment levels,” said Stewart an economic analyst at ITIF and co-author of the Index.

“In addition, U.S. manufacturing employment has declined 33 percent between 2000 and 2011, exceeding the losses of the Great Depression. Much of this decline can be attributed to declining U.S. competitiveness resulting from our failure to adapt to the demands of the globalized New Economy.”

More Work on "Win-Win" Scenarios Needed

To address these impacts and enhance economic transformation, the authors argued that state strategies should focus on establishing policies that reduce within-state zero-sum competition, spur “win-win” economic results that benefit the local and national economy, and enhance state-federal innovation-based economic development partnerships.

“In today’s highly competitive environment states must work together and with the federal government to overhaul their economic development policies,” said Atkinson, president of ITIF and co-author of the Index.

“Too often, states still view their economic competitors as next door, rather than halfway around the world. If, instead, they used incentives to expand broadband, support entrepreneurial assistance programs, or invest in research and technology transfer, they – and the nation as a whole – would be far more globally competitive.”

The State New Economy Index uses 26 indicators in five categories to assess states’ fundamental capacity to transform their economies and incubate innovation. The categories are: knowledge jobs, globalization, economic dynamism, the digital economy and innovation capacity.